**Exhibit 10.5**

 

# **LEASE AGREEMENT**

#  

THISLEASE AGREEMENT (“Lease”) is made and entered into as of September       ,2009 by and between EastGroup Properties, L.P., a Delaware limited partnership(“Landlord”) and CardioNet, Inc., a Delaware corporation (“Tenant”).

 

1.                                       Premises.  Landlord, in consideration of the payment ofrents and the performance by Tenant of all other terms, covenants andconditions of this Lease, leases to Tenant 10,818 rentable square feet ofspace, hereinafter referred to as the “Premises,” as shown on the attached siteplan labeled “Exhibit A”, located within building #3 (the “Building”) ofSky Harbor Business Park (the “Project”). The address of the Premises is 2750 South 18th Place, Suite 100,Phoenix, Arizona 85034.   Tenant’sProportionate Share of the Building is 23.10% and Tenant’s Proportionate Shareof the Project is 4.09%.  The partiesagree that for all purposes of this Lease the square footage of the Premisesshall be as stipulated above.

 

2.                                       Term.  The term of this Lease shall commence****upon substantial completion of theImprovements currently estimated to be December 1,2009 (the “Commencement Date”), and ending on the 65th full calendar month thereafter.  This period, including any renewals orextensions subsequently enacted pursuant to the terms of this Lease, shall bereferred to as the “Lease Term.”

 

3.                                       Base Rent.  Tenant shall pay to Landlord in advance,without demand, deduction or set-off, monthly installments of Base Rent, in theamounts set forth below, on or before the first day of each calendar month inlawful money of the United States at such place as Landlord designates inwriting.  Base Rent for fractional monthsshall be prorated.  If Tenant isdelinquent in any monthly installment of Base Rent or estimated OperatingExpenses for more than 5 days, then Tenant shall pay to Landlord a late chargeequal to five percent (5%) of the total sum due.  Said late charge shall be in addition to anyother rights and remedies available to Landlord hereunder or at law and shallnot be construed as a penalty.

 

4.                                       Base RentIncreases.  Base Rent shall be payable monthly inaccordance with the following schedule:

 

| **Period**                                        | ** ** | **Monthly Amount** | ** ** |
|---------------------------------------------------|------------|--------------------|------------|
| December 1, 2009 – April 30,  2010 |       | $                  | 0.00       |   |
| May 1, 2010 –  April 30, 2011      |       | $                  | 9,736.20   |   |
| May 1, 2011 –  April 30, 2012      |       | $                  | 9,952.56   |   |
| May 1, 2012 –  April 30, 2013      |       | $                  | 10,168.92  |   |
| May 1, 2013 –  April 30, 2014      |       | $                  | 10,385.28  |   |
| May 1, 2014 – April 30,  2015      |       | $                  | 10,601.64  |   |

 

5.                                       SecurityDeposit.  Tenant shall, upon theexecution of this Lease, deposit with Landlord as security for the payment ofrent and the performance of all other covenants to be performed by Tenant, thesum of $12,000.00.   The Security Depositshall be non-interest bearing.  If Tenantdefaults in the payment of any monthly rental installment or fails to performany other covenant within ten (10) days after receipt of written demand,Landlord may apply or retain sufficient sums from the Security Deposit towardspayment thereof.  If Landlord elects toapply all or a part of the Security Deposit, Tenant shall be obliged toimmediately replenish the Security Deposit for the amount so applied byLandlord.  The Security Deposit shall notbe applied to rent except upon approval of Landlord.  After all of Tenant’s obligations under thisLease have been fulfilled, Landlord shall refund the Security Deposit to Tenantwithin fifteen (15) days of the Lease Termination Date.

 

6.                                       Improvements.  On the Commencement Date, Landlord shalldeliver the Premises broom clean and free of debris with the HVAC, evaporativecooling, loading doors, lighting and building systems in good operatingcondition.  Landlord shall provide finalimprovement floor plans substantially consistent with the schematic drawingattached hereto as Exhibit C (“Final Plans”).  Landlord shall construct the Improvementsoutlined and in accordance with the attached Final Plans in a professionalmanner and to Tenant’s reasonable satisfaction. In the event the Improvementsare not completed by Landlord on or before December 1, 2009, and provided (1) theLandlord produced and delivered the Final Plans to Tenant within 14 businessdays following the effective date of this Lease and (2) Tenant completesits review of the Final Plans within 3 business days, the Term of this Leaseshall be extended for a period equal to the time between December 1, 2009and the actual Commencement Date and the Base Rent for such additional periodshall be $0.00.

 

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7.                                       OperatingExpenses.  During eachmonth of the Lease Term, on the same day that Base Rent is due, Tenant shallpay to Landlord an amount equal to 1/12 of the annual cost, as reasonablyestimated by Landlord, of Tenant’s Proportionate Share of the OperatingExpenses for the Building and the Project. Payments for any fractional month shall be prorated.  The term “Operating Expenses” means theactual out-of-pocket expenses incurred by Landlord with respect to ownership,maintenance and operation of the Building/Project including Taxes, Insurance,Common Area Maintenance, and Management Fee as set forth below:

 

(a)                                  Taxes — all taxes,assessments, and governmental charges (collectively “Taxes”) that accrueagainst the property during the Lease Term that are payable by Landlord.  Taxes shall include fees paid to consultantsto reduce Taxes and all sales or privilege taxes based on rents. Tenant shallpay directly to the authority all personal property taxes charged or leviedagainst Tenant’s furniture, fixtures and equipment in the Premises.

 

(b)                                 Insurance — the costto maintain all insurance required to be maintained by Landlord hereunder, butexcluding any charge for increased premiums due to acts or omissions of otheroccupants of the Building/Project because of extra risk which are reimbursed toLandlord by such other occupants.

 

(c)                                  Common AreaMaintenance - the total annual cost of operating the Building/Projectincluding, but not limited to, landscaping services; sweeping services;commonly metered utilities; water and sewer charges; window cleaning; trashcollection; association charges or assessments; maintenance, repair orreplacements to the Building/Project, including, without limitation, paving andparking areas, roads, driveways, roofs, exterior painting, utility lines,building mechanical, electrical and plumbing systems; and alterations to complywith municipal requirements.

 

(d)                                 Management Fee —property management fees payable at market rates (not to exceed five percent(5%) of the gross collected rent) to a property manager, including an affiliateof Landlord.

 

(e)                                  OperatingExpenses” shall not include:  (1) thecost of redecorating, renovating or special cleaning or similar services toindividual tenant spaces (or vacant space), not provided on a regular basis toother tenants of the Building; (2) wages or salaries (and taxesimposed upon employers with respect to such wages and salaries) and fringebenefits of personnel of Landlord above the level of Building General Manager;(3) any charge for depreciation or interest paid or incurred by Landlord; (4) leasingcommissions; (5) any charge for Landlord’s income tax, excess profittaxes, franchise taxes or similar taxes on Landlord’s business; (6) legalfees for the negotiation or enforcement of leases, the defense of Landlord’s title to orinterest in the Building/Project or any part thereof and other legal expensesrelated to Landlord’s financing, re-financing, mortgaging or selling or leasingthe Building/Project or any part thereof;(7) anydebt service payments (including principal, interest and other charges) orground rent; (8) costs incurred due to a breach by Landlord of the termsand conditions of this Lease or any Ground Lease provided such failure is nottriggered by the act or omission of Tenant; (9) any compensation paid toclerks, attendants or other persons in, and any other expenses (includingwithout limitation any utility services and janitorial services) arising from,commercial concessions operated by Landlord or any manager or any affiliate ofLandlord or such manager that exceed the competitive cost or fair market valuethat Landlord would pay to a non-affiliated third party; (10) any fines orfees or other costs (including without limitation court costs and attorney’sfees) for Landlord’s late payments or failure to comply with any laws or governmentalrequirements which are not caused by Tenant, its employees, agents, subtenants,invitees or contractors; (11) the costs of remediating, monitoring orinvestigating hazardous wastes or hazardous substances in, on or under thePremises or the Building/Project, except to the extent caused by Tenant, itsagents, employees, contractors, subtenants or invitees or Tenant’s activitieson the Premises; (12) any cost or expense covered by any warranty or guaranty; or (13)and ground lease rental.

 

IfTenant’s total payments of estimated Operating Expenses for any year are lessthan Tenant’s Proportionate Share of actual Operating Expenses for such year,then Tenant shall pay the difference to Landlord within 30 days after demand,and if more, then Landlord shall promptly refund the difference to Tenant orcredit the difference to Tenant’s account. For purposes of calculating Operating Expenses, a year shall mean acalendar year, except the first year, which shall begin on the CommencementDate, and the last year, which shall end on the expiration of this Lease.Tenant’s obligation to pay its proportionate share of Operating Expensesincurred during the Lease Term shall survive the expiration or termination ofthis Lease.  If requested by Tenantwithin six months of the delivery of the annual reconciliation, Landlord shallprovide or make available the supporting data upon which the actual OperatingExpenses were calculated for Tenant’s review.

 

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Tenant or its representativeshall have the right to examine Landlord’s books and records with respect tothe reconciliation of Operating Expenses for the prior calendar year duringnormal business hours at any time within six (6) months following thedelivery by Landlord to Tenant of any such statement of OperatingExpenses.  Any such audit (a) shallbe conducted where such records are customarily maintained during regularbusiness hours and upon at least ten (10) days advance written notice toLandlord, and (b) shall not be conducted more than once in any calendaryear.  Unless Tenant shall give Landlordwritten notice objecting to said reconciliation and specifying the items inwhich said reconciliation is claimed to be incorrect within sixty (60) daysafter its examination of Landlord’s books and records, said reconciliationshall be considered as final and accepted by Tenant.  If such audit shall disclose that OperatingExpenses have been overstated, Tenant shall deliver a letter to Landlord settingforth Tenant’s position accompanied by a reasonably detailed explanation of andtogether with reasonably detailed supporting data evidencing the basis on whichthe claim of an overcharge is made (an “Overcharge Notice’).  Upon receipt of an Overcharge Notice,Landlord shall, within thirty (30) days of receipt of the Overcharge Notice,either (a) notify Tenant in writing that it agrees with the determinationset forth in the Overcharge Notice and Landlord shall credit Tenant with theamount of such overcharge against the next succeeding amount of Tenant’s shareof Operating Expenses due from Tenant, or (b) notify Tenant in writingthat it does not agree with the determination set forth in the OverchargeNotice (“Landlord’s Dispute Notice”).

 

In the eventLandlord provides Tenant with a Landlord’s Dispute Notice, and Landlord andTenant, acting in good faith, are not able to resolve the dispute within thirty(30) days, then the Landlord and Tenant shall, as soon as reasonablypracticable thereafter, select an independent arbitrator, approved from theAmerican Arbitration Association, to resolve the dispute.

 

Tenantacknowledges that if the Building is part of a Project, the Project may includethe Building and other buildings either already existing or to be constructedin the future.  Tenant understands andagrees that, for the purposes of administering the provisions of this Paragraph7, so long as the Building is owned and/or managed in conjunction with otherbuildings, Operating Expenses and other costs reimbursable by the Tenant may bepaid, recorded and reported on a consolidated overall project basis.  Landlord may equitably increase or decreaseTenant’s Proportionate Share for any item of expense or cost reimbursable byTenant that relates to a repair, replacement, or service that benefits only thePremises or only a portion of the Building/Project that includes the Premisesor that varies with occupancy or use.

 

8.                                       Utilities.  Tenant shall pay directly to the provider allutilities that are separately metered. If not shared with other tenants as part of Operating Expenses, Tenantshall arrange and pay for trash collection services at the Premises.  Commonly metered utilities shall be includedas an Operating Expense.  Landlord maycause at Landlord’s expense any utilities to be separately metered orsub-metered or charged directly to Tenant by the provider. No interruption orfailure of utilities shall result in the termination of this Lease or abatementof rent.  Tenant agrees to limit use ofwater and sewer for normal restroom use.

 

9.                                       Insurance.  Landlord shall maintain all risk propertyinsurance covering the full replacement cost of the Building.  Landlord may maintain other insurancecoverage it deems necessary including, but not limited to, commercial liabilityinsurance and rent loss insurance. Tenant shall also reimburse Landlord for any increased premiums oradditional insurance, which Landlord reasonably deems necessary as a result ofTenant’s use of the Premises.

 

Tenant,at its expense, shall maintain during the Lease Term commercial liabilityinsurance with a minimum limit of $2,000,000 for personal injuries, and deaths,and property damage occurring on the Premises. Such insurance shall include contractual liability coverage insuringTenant’s indemnity obligations under this Lease. The commercial liabilitypolicy shall name Landlord as an additional insured, be issued by a companyreasonably acceptable to Landlord, provide primary coverage if Landlord’spolicy provides similar coverage, and shall not be cancelable unless thirty day’sprior written notice is given to Landlord. Tenant shall provide Landlord with a certificate of insurance prior tothe Commencement Date and upon each renewal of the policy.

 

Tenant,at its expense, shall maintain during the Lease Term all risk propertyinsurance covering the full replacement cost of all property and improvementsinstalled or placed in the Premises by Tenant at Tenant’s expense, includingits furniture, fixtures, inventory, equipment, supplies and personal property.

 

Landlordand Tenant each waives any claim, loss or cost it might have against the otherfor any personal injury or death, or damage to or theft, destruction, loss, orloss of use of any property (a “Loss”), to the extent the same is insured orrequired to be insured under any all risk property damage insurance policycovering the Premises, Building, Project, fixtures, personal property,improvements, or business, regardless of whether the negligence of the otherparty caused such Loss.

 

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10.                                 Use.  The Premises shall be used only for thepurpose of receiving, storing and shipping of materials and merchandise made ordistributed by Tenant and related office uses necessitated thereby. Tenant willuse the Premises in a careful, safe and proper manner and will not commitwaste, overload the floor or structure or otherwise damage the Premises.  Tenant shall not permit any objectionable orunpleasant odors, smoke, dust, gas, noise, or vibrations to emanate from the Premises,or take any other action that would constitute a nuisance or would disturb,unreasonably interfere with, or endanger Landlord or other tenants in theBuilding or Project. Tenant shall occupy the Premises in compliance with alllaws, codes, ordinances, and regulations now or hereafter applicable to thePremises or Building.  Outside storage isprohibited without Landlord’s written consent. Tenant may store overnight in the normal course of its business oneoperative tractor/trailer or truck for each dock high loading positioncontained in the Premises, provided this overnight storage does not interferewith other tenant’s use of the Building or Project.

 

11.                                 Parking.  Tenant shall be entitled to a minimum of 20unreserved parking spaces for operative automobiles and pick up trucks in thoseareas designated by Landlord for non-reserved parking.  Landlord may allocate parking spaces amongstTenant and other tenants in the Building or Project if Landlord determines thatsuch parking facilities are becoming crowded. However, Landlord shall not be responsible for enforcing Tenant’sparking rights against third parties. No vehicle abandoned or disabled or in astate of non-operation or disrepair shall be left at the Building or Project;Landlord reserves the right to remove said vehicle at the owner’s expense.

 

12.                                 Exemption ofLandlord from Liability; Indemnification.  Except to the extent such damage, loss orinjury is the result of the gross negligence or willful misconduct of Landlord,Tenant hereby agrees that Landlord and its agents and employees shall not beliable for injury to Tenant’s business including loss of income for damage togoods, wares, merchandise, or other property of Tenant, Tenant’s employees,invitees, customers, or any other person in or about the Premises, nor shallLandlord be liable for injury to the person of Tenant, Tenant’s agents,employees, contractors, or invitees, whether such damage or injury is caused byor results from fire, steam, electricity, gas, water, or rain, or from thebreakage, leakage, obstruction, or other defects of pipes, sprinklers, wires,appliances, plumbing, HVAC, or light fixtures, or from any other cause whethersaid damage or injury results from conditions arising upon the Premises orother portions of the Building or Project, or from other sources or places, andregardless of whether the cause of such damage or injury or the means ofrepairing the same is inaccessible to Tenant. Landlord shall not be liable for any damages arising from any act orneglect of any other tenant of the Building or Project.

 

Exceptfor claims waived in Paragraph 9 above, Tenant shall defend, indemnify (exceptto the extent Landlord is compensated by worker’s compensation insurance) andhold harmless Landlord against and from all liabilities, obligations, damages,penalties, claims, suits, demands, costs, charges and expenses, includingreasonable attorneys’ fees, which may be imposed upon or incurred by orasserted against Landlord by reason of any of the following: (a) any workor act done in, on or about the Premises or any part thereof at the directionof Tenant, its agents, contractors, subcontractors, servants, employees,licensees or invitees, except for the Improvements outlined in Exhibit Cor such other work that is done or performed by Landlord or its agents oremployees; (b) any negligence or other wrongful act or omission on thepart of Tenant or any of its agents, contractors, subcontractors, servants,employees, subtenants, licensees or invitees; and (c) any accident, injuryor damage to any person (including Tenant’s employees and agents) or propertyoccurring in, on or about the Premises or any part thereof, except only to theextent that such accident, injury or damage is caused by the gross negligenceor willful misconduct of Landlord. Tenant’s indemnity obligations as aforesaid shall not be limited oraffected by the provisions of any Worker’s Compensation Acts, disabilitybenefits acts or other employee benefits acts or similar acts or statutes.

 

Exceptfor claims waived in Paragraph 9 above and in this Paragraph 12, Landlord shalldefend, indemnify (except to the extent Tenant is compensated by worker’scompensation insurance) and hold harmless Tenant and its officers, directors,shareholders, employees and agents from and against any and all third-partyclaims, actions, damages, liability and expense (including all reasonableattorney’s fees, expenses and liabilities incurred in defense of any such claimor any action or proceeding brought thereon) arising from any negligence orwillful act of Landlord.  Landlord’sindemnity obligations as aforesaid shall not be limited or affected by theprovisions of any Worker’s Compensation Acts, disability benefits acts or otheremployee benefits acts or similar acts or statutes.

 

13.                                 Repairs.  Landlord shall maintain, at its expense, thestructural soundness of the roof, foundation, and exterior walls of theBuilding in good repair, reasonable wear and tear and damages caused by Tenant,its agents, invitees, and contractors excepted. The term “walls” as used in this paragraph shall not include windows,doors, store-fronts, overhead doors, dock bumpers, dock seals, dock plates, ordock levelers.  Tenant shall promptlygive Landlord written notice of any repair required by Landlord, and Landlordshall proceed with due diligence to make such repair.

 

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Tenant,at its expense, shall repair, replace and maintain in good condition allportions of the Premises and all areas, improvements and systems exclusivelyserving the Premises, including, without limitation, dock and loading areas,truck doors, plumbing, water and sewer lines up to points of common connection,fire protection systems, entries, doors, ceilings, roof membrane, windows,interior walls, demising walls, HVAC systems, and evaporative coolers.  Such repairs and replacements may includecapital expenditures whose benefit may extend beyond the Lease Term.  If Tenant fails to perform any repair orreplacement for which it is responsible, Landlord may perform such work and bereimbursed by Tenant within 30 days after written demand. If any of Tenant’sobligations hereunder affect other tenants or portions of the Building/Project,Landlord may perform the repair or replacement and include the cost as part ofOperating Expenses or allocate the cost to tenants as may be appropriate.

 

Tenantshall enter into a maintenance service contract with a vendor reasonablyacceptable to Landlord to periodically service the HVAC and evaporative coolersin the Premises in accordance with a scope of services reasonably prescribed byLandlord.  Tenant shall supply Landlord acopy of the contract upon request as evidence of compliance.

 

Notwithstandinganything to the contrary contained herein, in the event Landlord makes any ofthe following major capital replacements to the Building or Project:replacement of the roof membrane of the Building, resurfacing the parking lot,replacement of the concrete truck aprons, or full exterior repaint of theBuilding, then Tenant shall reimburse Landlord as part of Operating Expensesits pro rata share of the cost as amortized over the lesser of its useful lifeas reasonably determined by Landlord in accordance Generally AcceptedAccounting Principles or ten (10) years.

 

14.                                 Compliance withLaws and Regulations.  Tenantshall comply with all Federal, State, County and City laws, ordinances, rules andregulations affecting or respecting the use or occupancy of the Premises by theTenant or the business at any time thereon transacted by the Tenant, and Tenantshall comply with all rules in effect or which may be hereafter adopted byLandlord for the protection, welfare and orderly management of the Building andits tenants or occupants.

 

15.                                 Holding Over.  Tenant has no right to retain possession ofthe Premises beyond the expiration or termination of this Lease.  In the event that Tenant holds over, BaseRent shall be increased to 150% of the Base Rent applicable immediatelypreceding the expiration or termination plus all other payments required underthe Lease after the first 30 days of holdover. Tenant shall be responsible for all damages incurred by Landlord as aresult of such holding over.  Nothingcontained in this paragraph or Lease shall be construed as Landlord’s consentto holding over.

 

16.                                 Signs.  Tenant shall not make changes to the exteriorof the Premises, Building or grounds including the installation of signs,placards or other advertising media without Landlord’s prior written consentwhich consent shall not be unreasonably withheld, delayed or conditioned.  Any approved sign shall be installed byTenant, at its expense, and shall be in accordance with Landlord’s signcriteria and applicable municipal regulations. Tenant shall maintain signs in good condition and repair any damage uponremoval at the expiration or earlier termination of this Lease.

 

17.                                 Quiet Enjoyment.  Subject to payment of rent and performance byTenant of all material terms, conditions and covenants of the Lease, Tenantshall have peaceful and quiet enjoyment of the Premises during the Lease Term.

 

18.                                 Force Majeure.  Except for Tenant’s obligation to pay rentand other monetary obligations under this Lease, the parties shall not be heldresponsible for delays in the performance of their obligations hereunder whencaused by strikes, lockouts, labor disputes, acts of God, inability to obtainlabor or materials, or reasonable substitutes thereof, governmentalrestrictions, governmental regulations, governmental controls, delay inissuance of permits, acts of war, civil commotion, fire or other casualty, andother causes beyond the reasonable control of the parties (“Force Majeure”).

 

19.                                 Assignment andSubletting.  Tenantshall not assign this Lease nor sublet all or any part of the Premises withoutfirst securing Landlord’s written consent, which consent shall not beunreasonably withheld, delayed or conditioned.  In the event of an assignment or subletting, the assignee and/orsubtenant shall first assume in writing all of the obligations of Tenant underthis Lease and Tenant shall, for the full Lease Term, continue to be jointlyand severally liable with such assignee or subtenant for the payment of rentsand the performance of all obligations required of Tenant under this Lease.  Tenant hereby acknowledges that the use towhich the Premises are put, the compatibility of any occupant of the Premiseswith other tenants, and the ability to pay rent when due are of primeimportance and significance to the Landlord in the operation and maintenance ofthe Building in which the Premises are located. Each request for consent to an assignment or subletting shall be inwriting and include a fee of $500 as consideration for Landlord considering andprocessing said request. In the event the rent payable by an assignee orsubtenant exceeds the rent payable under this Lease, Tenant shall pay toLandlord as additional rent one half of the excess rent or other considerationafter Tenant recovers all out of pocket expenses including leasing commissions,rent concessions tenant improvements and legal fees.  Notwithstanding the above, Tenant may assignor sublet the Premises to any entity controlling Tenant, controlled by Tenant,or under common control with Tenant, without the prior consent of Landlord.

 

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20.                                 Casualty andRestoration.  If duringthe Lease Term all or a part of the Premises should be destroyed partially ortotally by fire or other casualty, Landlord shall notify Tenant within 30 days aftersuch damage as to the amount of time Landlord reasonably estimates it will taketo restore the Premises. If the restoration time is estimated to exceed 180days, either party may terminate this Lease by promptly notifying the otherparty and this Lease shall be terminated effective as of the date of thecasualty. If neither party elects to terminate the Lease or if Landlordestimates that restoration will take 180 days or less, then Landlord shall,subject to Force Majeure events and except for improvements made by or paid forby Tenant, restore Premises within 180 days following such destruction tosubstantially the same condition in which it existed at the time immediatelypreceding such destruction.  Tenant’sobligation to pay Base Rent and Operating Expenses shall abate for the periodof repair in proportion, which the area of the Premises that is not useable byTenant bears to the total area of the Premises. Notwithstanding the foregoing, either party may terminate this Lease ifthe Premises are damaged during the last year of the Lease Term and Landlordreasonably estimates that it will take more than 60 days to repair such damage.

 

21.                                 Eminent Domain.  If the whole of the Premises shall be takenby any public authority under the power of eminent domain, or if so much of theBuilding or grounds shall be taken by any such authority under the power ofeminent domain so that the Tenant cannot continue to operate its business inthe Premises, then the Lease Term of this Lease shall cease as of the day possessionis taken by such public authority and rents shall be paid up to that day withproportionate refund by Landlord of any such rents as may have been paid inadvance or deposited as security.  Theamount awarded for any taking under the power of eminent domain shall belong toand be the property of the Landlord. Nothing herein shall limit the Tenant’s ability to make an independentclaim for damages or awards.

 

22.                                 Waiver.  No waiver of any of the covenants andagreements herein contained or of any breach thereof shall be taken toconstitute a waiver of any other subsequent breach of such covenants andagreements or to justify or authorize the non-observance at any time of thesame or of any other covenants and agreements hereof.

 

23.                                 Limitation of Landlord’sLiability.               Landlord shallonly be responsible for its obligations under this Lease arising during itsperiod of ownership of the Building.  Anyliability of the Landlord under this Lease shall be limited solely to itsinterest in the Building/Project, and in no event shall any personal liabilitybe asserted against Landlord in connection with this Lease nor shall anyrecourse be had to any other property or assets of Landlord.  In no event shall any obligation or liabilitywhatsoever of Landlord become personally binding on any partner of Landlord orofficer, director or shareholder of EastGroup Properties, Inc., a Marylandreal estate investment trust.

 

24.                                 Subordination.  Subject to the following paragraph, thisLease is subject and subordinate to all mortgages, which may now or hereafteraffect the Premises or the Building of which it forms a part, and to allrenewals, modifications, consolidations, replacements and extensionsthereof.  This clause shall beself-operative and no further instrument of subordination shall be required anymortgagee, but in confirmation of such subordination, Tenant shall executepromptly any subordination certificate that Landlord may subsequently request;provided, however, that Tenant may condition such subordination upon theexecution and delivery by the applicable mortgage holder of a so-called “non-disturbance”agreement in customary form.

 

Forthe benefit of Tenant (and upon Tenant’s request therefor), Landlord shallobtain from its current mortgagee, if any, on its current mortgagee’s form, aSubordination, Non-Disturbance and Attornment Agreement (a “SNDA”), to beentered into between Landlord, Tenant and Landlord’s current mortgagee, underwhich, among other things, this Lease and the rights of Tenant hereunder shallnot be adversely affected or modified by foreclosure or the exercise of anyother right or remedy by the mortgagee so long as Tenant shall not be indefault under any of the provisions of this Lease beyond any applicable periodof grace, and under which Tenant shall attorn to and recognize the mortgagee orany purchaser at foreclosure sale or other successor-in-interest to Landlord asTenant’s landlord hereunder.  Landlordalso agrees to use commercially reasonable efforts to obtain a SNDA from eachfuture mortgagee.  Each SNDA shall be inthe form required by the lender.  Tenant’sobligations under this Lease shall not be affected by Landlord’s failure toobtain a SNDA from its current or any future mortgagee.  Tenant covenants and agrees to execute anddeliver to Landlord or to the lender a SNDA within ten (10) days after awritten request therefor.

 

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25.                                 Alterations andTrade Fixtures.  Tenantshall not make any alterations, additions or improvements (“Alterations”) tothe Premises, Building or Project without Landlord’s prior written consent withthe exception of the Improvements outline in Exhibit C hereto.   Alterations approved by Landlord shallcomply with all applicable codes and municipal requirements and be installedwith commercial grade materials in a good and workmanlike manner by acontractor reasonably acceptable to Landlord. Tenant shall furnish security ormake other arrangements satisfactory to Landlord to assure payment for the completionof work free and clear of liens and shall provide certificates indicatinginsurance sufficient to protect Landlord from any liability or damages duringconstruction. Upon surrender of the Premises, all Improvements and Alterationsshall remain on the Premises as Landlord’s property, except to the extentLandlord requires removal at Tenant’s expense. Tenant may at any time request in writing Landlord’s determination as towhether an Improvement or Alteration shall become property of Landlord.   Landlord shall respond to Tenant’s writtenrequest within 10 days or Landlord shall have deemed to have waived its rights.Such written request shall make reference to the 10 day time limit. Tenant, atits own cost and expense, may erect shelves, bins, machinery and trade fixtures(“Trade Fixtures”) in the ordinary course of its business provided that suchitems do not alter the basic character of the Premises, do not overload ordamage the Premises, and may be removed without damage to the Premises.  The installation of Trade Fixtures mustcomply with all codes and municipal requirements.  Tenant shall remove its Trade Fixtures uponsurrender of the Premises and repair any damage caused by the removal.

 

26.                                 Surrender ofPremises.  Upontermination of the Lease Term or earlier termination of Tenant’s right ofpossession, Tenant shall surrender the Premises to Landlord in the samecondition as received, broom clean and free of debris with the HVAC,evaporative cooling, loading doors, lighting and building systems in goodoperating condition, ordinary wear and tear and casualty loss and condemnationexcepted.  Any Alterations or TradeFixtures not removed as required shall be deemed abandoned and may be removed,stored or disposed of by Landlord at Tenant’s expense.  All obligations of Tenant not fully performedas of the termination of the Lease Term shall survive the termination of theLease Term, including without limitation, indemnity obligations, monetaryobligations, and obligations concerning repair of the Premises.

 

27.                                 Inspection andAccess.  Landlord or its agents shallhave the right to enter the Premises after reasonable notice to Tenant duringnormal business hours, except in the case of emergencies where notice and timerestrictions shall not be imposed, to inspect and make repairs to the Premisesor the Building.  Within 9 months priorto the date of the expiration of the Lease, Landlord or its agents shall havethe right to enter the Premises with reasonable notice during normal businesshours for the purpose of showing the Premises to prospective tenants orpurchasers.  Landlord may granteasements, make public dedications, designate common areas and createrestrictions on or about the Premises, Building or Project, provided that nosuch easement, dedication, designation or restriction materially interfereswith Tenant’s use or occupancy of the Premises. At Landlord’s request, Tenant shall execute such instruments as may benecessary for such easements, dedications, or restrictions.

 

28.                                 Events ofDefault.  Each of the following eventsshall be an event of default (“Event of Default”) by Tenant under this Lease:

 

(a)                                  Tenant shallfail to pay Base Rent or any other payment required herein when due, and suchfailure shall continue for a period of 5 days following written notice fromLandlord to Tenant.

 

(b)                                 Any insurancerequired to be maintained by Tenant pursuant to this Lease shall be terminatedor cancelled or shall expire or shall be reduced below the limits specified inthis Lease.

 

(c)                                  Tenant shallattempt or there shall occur any assignment, sublease or other transfer ofTenant’s interest in this Lease except as is otherwise permitted in this Lease.

 

(d)                                 The appointmentof a trustee or a receiver to take possession of all or substantially all ofTenant’s property, or the attachment, execution or other judicial seizure ofall or substantially all of Tenant’s assets located at the Premises, unlesssuch appointment, attachment, execution or seizure is discharged within thirty(30) calendar days after the appointment, attachment, execution or seizure.

 

(e)                                  The institutionof bankruptcy, reorganization, arrangement, insolvency or liquidationproceedings, or any other proceedings for relief under any bankruptcy orinsolvency law or any other similar law for the relief of debtors, by oragainst Tenant, and if instituted against Tenant, the same are not dismissedwithin thirty (30) calendar days after the institution of such proceedings.

 

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(f)                                    Tenant shallfail to comply with any provision of this Lease other than those specificallyreferred to in this Paragraph 28, and except as otherwise expressly providedherein, such default shall continue for more than 30 days after Landlord shallhave given Tenant written notice of such default (unless such performance dueto the nature of the obligation, requires a period of time in excess of 30days, then after such period of time as is reasonably necessary).

 

29.                                 Landlord’sRemedies.  On theoccurrence of any such Event of Default, Landlord shall, in addition to anyother rights or remedies available to Landlord under this Lease and under thelaws of the state in which the Premises are located, have the following rightsand remedies:

 

(a)                                  Termination ofLease.  Landlord may terminate thisLease and Tenant’s right of possession by giving Tenant written noticeindicating the date upon which this Lease is terminated.  Upon such termination, Landlord shall beentitled to recover from Tenant the following amounts: (i) all accrued andunpaid Base Rent, Operating Expenses, and other sums provided for in this Leaseto the date of such termination; (ii) the unamortized cost to Landlord,computed and determined in accordance with generally accepted accountingprinciples, of the Improvements paid for and installed by Landlord pursuant tothis Lease; (iii) the costs incurred by Landlord to relet the Premises ora portion thereof, including brokers commissions, repairs, alterations,improvements, and costs to remove and store Tenant’s property; (iv) thepositive difference, if any, of the present value of the Base Rent pursuant tothis Lease for the remainder of the Lease Term had this Lease not beenterminated less the present value of the then fair market rental value for thePremises for the remainder of the Lease Term had this Lease not beenterminated, such present value computed in each case using 9%; and (v) anydamages in addition thereto, including reasonable attorneys’ fees, court costs,and collection services, which Landlord shall have sustained by reason of thebreach of any of the terms, conditions and covenants of this Lease.

 

(b)                                 Re-EntryWithout Termination.  Landlordmay re-enter the Premises without terminating this Lease, and remove allproperty from the Premises, and relet the Premises or any part thereof for theaccount of Tenant, upon such terms as Landlord in Landlord’s sole discretionshall determine. Landlord shall not be required to accept any tenant offered byTenant or to observe any instructions given by Tenant relative to suchreletting.  In the event of any suchreletting, Landlord may make repairs, alterations, and additions to thePremises to the extent deemed reasonably necessary by Landlord, and Tenantshall upon demand pay the cost thereof. Landlord may collect the rents from any such reletting and apply thesame first to the payment of the repairs, alterations, additions, expenses ofre-entry, attorney’s fees, court costs, collection services, and leasingcommissions and second to the payment of Base Rent and Operating Expensesherein provided to be paid by Tenant, and any excess or residue shall operateonly as an offsetting credit against the amount of Base Rent and OperatingExpenses as the same thereafter becomes due and payable hereunder.  No such re-entry or repossession, repairs,alterations and additions or reletting shall be construed as an eviction orouster of Tenant or as an election on Landlord’s part to terminate this Leaseunless a written notice of such intention be given to Tenant, nor shall thesame operate to release the Tenant in whole or in part from any of the Tenant’sobligations hereunder, and Landlord may, at any time and, from time to time,sue and recover judgment for any deficiencies from time to time remaining afterthe application from time to time of the proceeds of any such reletting.

 

(c)                                  Other.  Landlord may pursue any other remedy now orhereafter available to Landlord under the laws in which the Premises arelocated. The failure of Landlord at any time to enforce its rights under thisLease shall not be construed as having created a custom that modifies theterms, conditions or covenants of the Lease. The rights, privileges, elections and remedies of Landlord under thisLease shall be cumulative, and Landlord shall have the right to exercise suchremedies at any time and from time to time singularly or in combination.  If Landlord exercises either of the remediesprovided for in subparagraphs (a) and (b) hereinabove, Tenant shallsurrender possession and vacate the Premises immediately and deliver possessionthereof to Landlord, and Landlord may then or at any time thereafter re-enterand take complete and peaceful possession of the Premises.

 

30.                                 Liens. Tenant has noexpress or implied authority to create or place any lien or encumbrance of anykind upon, or in any manner to bind the interest of Landlord or Tenant in, thePremises or to charge the rentals payable hereunder for any claim in favor ofany person dealing with Tenant, including those who may furnish materials orperform labor for any construction or repairs. Tenant covenants and agrees that it will pay or cause to be paid allsums legally due and payable for labor performed or materials furnished inconnection with any work performed on the Premises and that it will save andhold Landlord harmless from all loss, cost or expense based on or arising outof asserted claims or liens against the leasehold estate or against theinterest of Landlord in

 

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thePremises under this Lease.  Tenant shallgive Landlord immediate written notice of the placing of any lien orencumbrance against the Premises and cause such lien or encumbrance to bedischarged within 30 days of the filing or recording; provided, however, Tenantmay contest such liens or encumbrances as long as such contest preventsforeclosure of the lien or encumbrance and Tenant causes such lien orencumbrance to be bonded or insured over in a manner satisfactory to Landlordwithin such 30 day period.

 

31.                                 Estoppel Certificate.  The parties shall within 10 days afterwritten notice from the other party execute and deliver an estoppel certificateconfirming to others that this Lease is in full force and effect, that neitherparty is in default and other such factual information as may be reasonablyrequired.

 

32.                                 HazardousMaterial.  Except forHazardous Materials contained in products used by Tenant in de minimisquantities for ordinary cleaning or office purposes, Tenant shall not permit orcause any party to bring any Hazardous Materials upon the Premises ortransport, store, use, generate, manufacture or release any Hazardous Materialin or about the Premises without Landlord’s prior written consent.  If Hazardous Materials storage is approved byLandlord, Tenant shall at all times operate in strict compliance with allapplicable federal, state, and local laws, rules, regulations, and orders.  For purposes of this provision, the term “HazardousMaterials” shall mean and refer to any waste, pollutant, material, or contaminant,or other substance of any kind or character that are or become regulated ashazardous or toxic waste or substance, or which require special handling ortreatment, under any applicable local, state, or federal law, rule, regulation,or order.  Landlord shall at all timeshave access to the Premises and a right to perform inspections and tests withrespect to Hazardous Materials. Tenant, at its sole cost and expense, shallremediate in a manner satisfactory to Landlord any release of HazardousMaterials at the Building/Project caused by Tenant, its agents, employees,contractors, subtenants, or invitees.

 

Tenantshall indemnify, defend, and hold harmless Landlord from and against (a) anyloss, cost, expense, claim, or liability arising out of any investigation,monitoring, clean-up, containment, removal, storage, or restoration work thenecessity for which was caused or created by Tenant, its agents, employees,contractors, subtenants or invitees (herein referred to as “Remedial Work”)required by, or incurred by Landlord or any other person or party in areasonable belief that such Remedial Work is required by any applicablefederal, state or local law, rule, regulation or order, or by any governmentalagency, authority, or political subdivision having jurisdiction over thePremises, and (b) any claims of third parties for loss, injury, expense,or damage arising out of the presence, release, or discharge of any HazardousMaterials on, under, in, above, to, or from the Premises which was caused orcreated by Tenant, its agents, employees, contractors, subtenants or invitees..  In the event any Remedial Work is sorequired under any applicable federal, state, or local law, rule, regulation ororder, Tenant shall promptly perform or cause to be performed such RemedialWork in compliance with such law, rule, regulation, or order.  In the event Tenant shall fail to commencethe Remedial Work in a timely fashion, or shall fail to prosecute diligentlythe Remedial Work to completion, such failure shall constitute an event ofdefault on the part of Tenant under the terms of this Lease, and Landlord, inaddition to any other rights or remedies afforded it hereunder, may, but shallnot be obligated to, cause the Remedial Work to be performed, and Tenant shallpromptly reimburse Landlord for the cost and expense thereof upon demand.  Landlord will not assert a claim againstTenant for Hazardous Materials which are not caused by Tenant, its agents,employees, contractors, subtenants, assignees or invitees, or which were releasedprior to this Lease Term.

 

33.                                 Miscellaneous.

 

(a)                                  The partieswaive their respective rights to a trial by jury in any action or proceedinginvolving the Premises or arising out of this Lease.

 

(b)                                 The partiesagree that in the event any clause or provision of this Lease is ruled illegal,invalid or unenforceable under present or future laws, then such portion shallbe deemed severable, and it shall not invalidate or impair the Lease as a wholeor any other provision of the Lease.

 

(c)                                  All provisionsof this Lease to be observed or performed by the parties are both covenants andconditions.  In construing this Lease,all heading and titles are for convenience of the parties only. Wheneverrequired by the context, the singular shall mean plural and vice versa. Thenormal rule of construction to the effect that any ambiguities are to beresolved against the drafting party shall not be employed in the interpretationof this Lease.

 

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(d)                                 Landlord shallhave the right, at any time without liability to Tenant, to make, at Landlord’sown expense, repairs, alterations, additions and improvements, structural orotherwise, in or to the Premises, Building or Project, provided that Landlordshall use commercially reasonable efforts to minimize the inconvenience orannoyance to Tenant during construction as is dictated by the circumstances.

 

(e)                                  Time is of theessence of each and every provision of this Lease.

 

(f)                                    This Leaseconstitutes the entire agreement between the parties and supersedes allpromises, representations, negotiations and prior agreements.  No waiver, modifications, additions oraddenda to this Lease shall be valid unless in writing and signed by both theLandlord and the Tenant.

 

(g)                                 This Lease shallbe binding upon and inure to the parties and their respective successors andassigns, and this Lease shall be governed by and construed in accordance withthe laws of the state in which the Premises are located.

 

(h)                                 Any payments orcharges due from Tenant to Landlord hereunder shall be considered rent for allpurposes of this Lease.

 

(i)                                     Each individualexecuting this Lease represents and warrants that he or she is duly authorizeto do so.

 

(j)                                     Preparation andsubmission of this Lease by Landlord to Tenant shall not be deemed anoffer.  This Lease is not intended to bebinding until executed and delivered by all parties hereto.

 

(k)                                  If and whenincluded within the term “Tenant” as used in this instrument, there is morethan one person, firm or corporation, each shall be jointly and severallyliable for the obligations of Tenant.

 

(l)                                     Upon executionand delivery of the Lease and occupancy of Premises, Landlord shall pay thefollowing real estate brokers a commission per separate agreement: CB Richard Ellis represents Landlordexclusively and Cresa Partners represents Tenant exclusively.  The parties represent and warrant to theother that it has had no dealings with any other broker or brokers except aslisted above in connection with this Lease. The parties agree to indemnify, defend and hold the other harmless fromand against any liability or claim for compensation made by any unnamed broker.

 

(m)                               All noticesrequired under this Lease to be given to Tenant shall be given to it at thePremises or at such other place as Tenant may designate in writing.  Any such notice to be given to Landlord underthis Lease shall be given to it at 2200 East Camelback Road, Suite 210,Phoenix, Arizona 85016, Attn: Asset Manager and 190 East Capitol Street, Suite 400,Jackson, Mississippi 39201, Attn: President or at such other place as Landlordmay designate in writing.  All noticesshall be in writing and shall be sent by certified mail, postage prepaid, or bypersonal delivery, or by commercial courier. Notices shall be deemed to have been given (i) in the case ofmailing, when postmarked, or (ii) in the case of hand delivery or deliveryby commercial courier, when delivered.

 

34.           Patriot Act.   Each party hereby represents, warrants andcertifies that: (i) neither it nor its officers, directors, or controllingowners is acting, directly or indirectly, for or on behalf of any person,group, entity, or nation named by any Executive Order, the United StatesDepartment of Justice, or the United States Treasury Department as a terrorist,“Specifically Designated National or Blocked Person,” or other banned orblocked person, entity, nation, or transaction pursuant to any law, order, rule orregulation that is enforced or administered by the Office of Foreign AssetsControl (“SDN”); (ii) neither it nor its officers, directors orcontrolling owners is engaged in this transaction, directly or indirectly onbehalf of, or instigating or facilitating this transaction, directly orindirectly on behalf of, any such person, group, entity, or nation; and (iii) neitherit nor its officers, directors or controlling owners is in violation ofPresidential Executive Order 13224, the USA PATRIOT Act, (Public Law 107-56),the Bank Secrecy Act, the Money Laundering Control Act or any regulations promulgatedpursuant thereto.  Each party herebyagrees to defend, indemnify and hold harmless the other party from and againstany and all claims, damages, losses, risks, liabilities and expenses (includingreasonable attorneys’ fees and costs) arising from or related to any breach ofthe foregoing representations, warranties and certifications by theindemnifying party.  The provisions ofthis Paragraph shall survive the expiration or earlier termination of thisLease.

 

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35.           Exhibits.  The Exhibits listed below are incorporatedinto and made a part of this Lease:

 

Exhibit A- Premises

Exhibit B- Rules and Regulations

Exhibit C– Improvements

Exhibit D– Renewal Option

 

INWITNESS WHEREOF, Landlord and Tenant have executed this Lease as of the datewritten on Page 1.

 
| **LANDLORD**                                | ** **                  | **TENANT**              |
|---------------------------------------------|-----------------------------|-------------------------|
|                                        |                        |                    |
| EASTGROUP  PROPERTIES, L.P.,                |                        | CardioNet, Inc.,   |
| a  Delaware limited partnership             |                        | a  Delaware corporation |
| By:  EastGroup General Partners, Inc., |                        |                    |
| a  Delaware corporation                     |                        |                    |
|                                        |                        |                    |
|                                        |                        |                    |
| By:                                         |                        |                    | By: |   |
|                                        | William  D. Petsas          |                    |   | Name: | John  F. Imperato |
|                                        | Senior  Vice President      |                    |   | Title: | Senior  Vice President, Business Operations |
|                                        |                        |                    |
|                                        |                        |                    |
|                                        |                        |                    |
| By:                                         |                        |                    |   |
|                                        | Michael  P. Sacco, III |                    |   |
|                                        | Vice  President             |                    |   |

 

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** **

**Exhibit A**

**Premises**

 

ThePremises contain 10,818 rentable square feet and is known by the followingstreet address 2750 South 18th Place, Suite 100, Phoenix,Arizona 85034.

 

 

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** **

**Exhibit B**

**Rules andRegulations**

** **

1.               The sidewalk, entries, anddriveways of the Project shall not be obstructed by Tenant, or its agents, orused by them for any purpose other than ingress and egress to and from thePremises.

 

2.               Tenant shall not place anyobjects, including antennas, outdoor furniture, etc., in the parking areas,landscaped areas or other areas outside of its Premises, or on the roof of theProject.

 

3.               Except for seeing-eye dogs,no animals shall be allowed in the offices, halls, or corridors in the Project.

 

4.               Tenant shall not disturb theoccupants of the Project or adjoining buildings by the use of any radio ormusical instrument or by the making of loud or improper noises.

 

5.               If Tenant desirestelegraphic, telephonic or other electric connections in the Premises, Landlordor its agent will direct the electrician as to where and how the wires may beintroduced; and, without such direct, no boring or cutting of wires will bepermitted.  Any such installation orconnection shall be made at Tenant’s expense.

 

6.               Tenant shall not install oroperate any steam or gas engine or boiler, or other mechanical apparatus in thePremises, except as specifically approved in the Lease.  The use of oil, gas or inflammable liquidsfor heating, lighting or any other purpose is expressly prohibited.  Explosives or other articles deemed extrahazardous shall not be brought into the Project.

 

7.               Parking any type ofrecreational vehicles is specifically prohibited on or about the Project.  Except for the overnight parking of operativevehicles, no vehicle of any type shall be stored in the parking areas at anytime.  In the event that a vehicle isdisabled, it shall be removed within 48 hours. There shall be no “For Sale” or other advertising signs on or about anyparked vehicle.  All vehicles shall beparked in the designated parking areas in conformity with all signs and othermarkings.  All parking will be openparking, and no reserved parking, numbering or lettering of individual spaceswill be permitted except as specified by Landlord.

 

8.               Tenant shall maintain thePremises free from rodents, insects and other pests.

 

9.               Landlord reserves the rightto exclude or expel from the Project any person who, in the judgment ofLandlord, is intoxicated or under the influence of liquor or drugs or who shallin any manner do any act in violation of the Rules and Regulations of theProject.

 

10.         Tenant shall not cause anyunnecessary labor by reason of Tenant’s carelessness or indifference in thepreservation of good order and cleanliness. Landlord shall not be responsible to Tenant for any loss of property onthe Premises, however occurring, or for any damage done to the effects ofTenant by the janitors or any other employee or person.

 

11.         Tenant shall give Landlordprompt notice of any defects in the water, lawn sprinkler, sewage, gas pipes,electrical lights and fixtures, heating apparatus, or any other serviceequipment affecting the Premises.

 

12.         Tenant shall not permitstorage outside the Premises or dumping of waste or refuse or permit anyharmful materials to be placed in any drainage system or sanitary system in orabout the Premises.

 

13.         All moveable trashreceptacles provided by the trash disposal firm for the Premises must be keptin the trash enclosure areas, if any, provided for that purpose.

 

14.         No auction, public orprivate, will be permitted on the Premises or the Project.

 

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15.         No awnings shall be placedover the windows in the Premises except with the prior written consent ofLandlord.

 

16.         The Premises shall not beused for lodging, sleeping or cooking or for any immoral or illegal purposes orfor any purpose other than that specified in the Lease.  No gaming devices shall be operated in thePremises.

 

17.         Tenant shall ascertain fromLandlord the maximum amount of electrical current, which can safely be used inthe Premises, taking into account the capacity of the electrical wiring in theProject and the Premises and the needs of other tenants, and shall not use morethan such safe capacity.  Landlord’sconsent to the installation of electric equipment shall not relieve Tenant fromthe obligation not to use more electricity than such safe capacity.

 

18.         Tenant assumes fullresponsibility for protecting the Premises from theft, robbery and pilferage.

 

19.         Tenant shall not install oroperate on the Premises any machinery or mechanical devices of a nature notdirectly related to Tenant’s ordinary use of the Premises and shall keep allsuch machinery free of vibration, noise and air waves which may be transmittedbeyond the Premises.

 

20.         Tenant shall be allowed toinstall an outside trash compactor at one of Tenant’s loading docks.

 

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** **

**Exhibit C**

**Improvements**

** **

a)                                      Landlord agrees to furnishor perform at Landlord’s sole cost and expense those items of construction andthose improvements (the “Improvements”) specified below in accordance withbuilding standards:

 

·                  Constructapproximately 10,818 square feet of office/production and warehouse area asdepicted on the attached floor plan labeled Exhibit C, Improvements, FloorPlan.

·                  Install 4 T-5florescent lights in the warehouse area

 

b)                                     If Tenant shalldesire any changes, after Tenant signs and approves the final constructiondrawings Tenant shall so advise Landlord in writing and Landlord shalldetermine within 3 days whether such changes can be made in a reasonable andfeasible manner.  Any and all costs ofreviewing any requested changes, and any and all costs of making any changes tothe Improvements which Tenant may request and which Landlord may agree shall beat Tenant’s sole cost and expense and shall be paid to Landlord upon demand andbefore execution of the change order.

 

c)                              Landlord shall proceedwith and complete the construction of the Improvements.  As soon as such Improvements have beenSubstantially Completed and Landlord delivers a Certificate of Occupancy fromCity of Phoenix to Tenant, Landlord shall notify Tenant in writing of the datethat the Tenant Improvements were Substantially Completed.  Such date, unless an earlier date isspecified as the Commencement Date in the Lease or otherwise agreed to inwriting between Landlord and Tenant, shall be the Commencement Date unless the completionof such improvements was delayed due to any act or omission of, or delay causedby, Tenant including, without limitation, Tenant’s failure to approve plans,complete submittals or obtain permits within the time periods agreed to by theparties or as reasonably required by Landlord, in which case the CommencementDate shall be the date such improvements would have been completed but for thedelays caused by Tenant.  TheImprovements shall be deemed substantially completed (“Substantially Completed”)when, in the opinion of the construction manager (whether an employee or agentof the Landlord or a third party construction manager), the Premises aresubstantially completed except for punch list items which do not prevent in anymaterial way the use of the Premises for the purposes for which they wereintended and Landlord has delivered to Tenant a Certificate of Occupancy fromthe City of Phoenix.  After theCommencement Date, Tenant shall, upon demand, execute and deliver to Landlord aletter of acceptance of delivery of the Premises.

 

d)                                     The failure ofTenant to take possession of or to occupy the Premises shall not serve torelieve Tenant of the obligations arising on the Commencement Date or delay thepayment of rent by Tenant.  Subject toapplicable ordinances and building codes governing Tenant’s right to occupy orperform in the Premises.  Tenant shall beallowed to install its Tenant Improvements, machinery, equipment, fixtures, orother property on the Premises at least three weeks prior to completion ofconstruction provided that such permission is granted by the City of Phoenixbuilding inspector and Tenant does not thereby interfere with the completion ofconstruction or cause any labor dispute as a result of such installations, andprovided further that property, and all liability, loss, or damage arising fromany injury to the Project or the property of Landlord, its contractors,subcontractors, or materialmen, and any death or personal injury to any personor persons arising out of such installations. Delay in putting Tenant in possession of the Premises shall not makeLandlord liable for any damages arising therefrom.

 

e)                                      Except forincomplete punch list items, which shall be completed within 30 days of receiptof a Certificate of Occupancy Tenant upon the Commencement Date shall have andhold the Premises as the same shall then be without any liability or obligationon the part of the Landlord for making any further alterations or improvementsof any kind in or about the Premises.

 

f)                                        Notwithstandinganything to the contrary contained herein, all manufacturer’s and contractor’swarranties shall be available for Tenant’s benefit and be for a minimum periodof one year from the Commencement Date.

 

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**Exhibit C**

**Improvements**

**FloorPlan**

** **

 

NOTE: THIS FLOOR PLAN IS A GENERAL GUIDELINE OF THEIMPROVEMENTS TO BE CONSTRUCTED AND WILL BE REPLACED WITH THE ARCHITECT’S FINALFLOOR PLAN AS MUTUALLY AGREED UPON BETWEEN LANDLORD AND TENANT.

 

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**Exhibit D**

**Renewal Option**

 

(a)                                  Provided thatas of the time of the giving of the Extension Notice and the Commencement Dateof the Extension Term, (x) Tenant is the Tenant originally named herein oris an entity controlling Tenant, controlled by Tenant, or under common controlwith Tenant,  (y) Tenant actuallyoccupies all of the Premises initially demised under this Lease and any spaceadded to the Premises, and (z) no Event of Default exists or would existbut for the passage of time or the giving of notice, or both, then Tenant shallhave the right to extend the Lease Term for one additional term of 5 years(such additional term is hereinafter called the “Extension Term”) commencing onthe day following the expiration of the Lease Term (hereinafter referred to asthe “Commencement Date of the Extension Term”). Tenant shall give Landlord written notice (hereinafter called the “ExtensionNotice”) of its election to extend the term of the Lease Term at least 6months, prior to the scheduled expiration date of the Lease Term.

 

(b)                                 The Base Rent payablemonthly by Tenant to Landlord during the Extension Term shall be the greater of(i) the Base Rent applicable to the last year of the initial Lease termand (ii) the then prevailing market rate for comparable space in theProject and comparable buildings in the vicinity of the Project, taking intoaccount the size of the Lease, the length of the renewal term, marketescalations and the credit of Tenant. The Base Rent shall not be reduced by reason of  any costs or expenses saved by Landlord byreason of Landlord’s not having to find a new tenant for such premises(including, without limitation, brokerage commissions, costs of improvements,rent concessions or lost rental income during any vacancy period. In the eventLandlord and Tenant fail to reach an agreement on such rental rate and executethe Amendment (defined below) at least 4 months prior to the expiration of theLease, then Tenant’s exercise of the renewal option shall be deemed withdrawnand the Lease shall terminate on its original expiration date.

 

(c)                                  The determination ofBase Rent does not reduce the Tenant’s obligation to pay or reimburse Landlordfor Operating Expenses and other reimbursement items as set forth in the Lease,and Tenant shall reimburse and pay Landlord as set forth in Lease with respectto such Operating Expenses and other items with respect to the Premises duringthe Extension Term without regard to any cap on such expenses set forth in theLease.

 

(d)                                 Except for the BaseRent as determined above, Tenant’s occupancy of the Premises during theExtension Term shall be on the same terms and conditions as are in effectimmediately prior to the expiration of the initial Lease Term; provided,however, Tenant shall have no further right to any allowances, credits orabatements or any options to expand, contract, renew or extend the Lease.

 

(e)                                  Time is of the essenceas to the giving of the Extension Notice. If Tenant does not give the ExtensionNotice within the period set forth in paragraph (a) above, Tenant’s rightto extend the Lease Term shall automatically terminate.

 

(f)                                    Landlord shall have noobligation to refurbish or otherwise improve the Premises for the ExtensionTerm.  The Premises shall be tendered onthe Commencement Date of the Extension Term in “AS-IS” condition.

 

(g)                         If the Lease isextended for the Extension Term, then Landlord shall prepare and Tenant shallexecute an amendment to the Lease confirming the extension of the Lease Termand the other provisions applicable thereto.

 

(h)                                 If Tenantexercises its right to extend the term of the Lease for the Extension Termpursuant to this Addendum, the term “Lease Term” as used in the Lease, shall beconstrued to include, when practicable, this Extension Term.

 

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